Gujarat High Court
Commissioner Of Wealth Tax vs Rajeshkumar R. Gandhi on 11 October, 1995
Equivalent citations: [1996]219ITR408(GUJ)
Author: M.S. Shah
Bench: M.S. Shah
JUDGMENT Rajesh Balia, J.
1. A joint statement of case has been submitted by the Tribunal, Ahmedabad Bench 'A' in respect of four asst. yrs. 1980-81 to 1983-84 and referred the following questions of law for the opinion of this Court arising out of WTA Nos. 450 to 452/A/88 and WTA No. 1079/A/1987 :
"Whether the Tribunal is right in law and on facts directing the WTO to value the immovable properties in accordance with the new valuation rules which were brought on the statute book by the Direct Tax Laws (Amendment) Act, 1989, Sch. III, w.e.f. 1st April, 1989 ?
2. The facts necessary for the present purpose are that during the pendency of appeals regarding wealth-tax assessment of the assessee for the asst. yrs. 1980-81 to 1983-84, s. 7 of the WT Act providing for manner of determining the value of any asset other than cash was substituted by Direct Tax Laws (Amendment) Act, 1989 w.e.f. 1st April, 1989. Prior to its amendment, s. 7 provided that the value of any asset other than cash for the purpose of WT Act shall be estimated price which, in the opinion of the AO, it would fetch if sold in the open market on the valuation date. Under the provisions as inserted by Direct Tax Laws (Amendment) Act, 1989, it was provided that value of asset other than cash for the purpose of wealth-tax shall be determined in the manner laid down in Sch. III. As appeal was also in respect of valuation of immovable properties as on the respective valuation date relevant to respective assessment orders, the Tribunal remitted the question of valuation of immovable properties to the WTO for valuation in accordance with the new rules conferred in Sch. III inserted by the Direct Tax Laws (Amendment) Act, 1989, by its order dt. 3rd Sept., 1990. It is in these circumstances, the aforesaid question came for determination.
3. The learned counsel appearing for the Revenue candidly stated that the answer to the question shall be governed by the principle enunciated by this Court in CWT vs. Kasturbhai Mayabhai (1987) 164 ITR 107 (Guj) and in CWT vs. Niranjan Narottam (1988) 173 ITR 693 (Guj). The Court taking note of the fact that s. 7(1) of the Act is a machinery section and s. 46(2) provides for making rules for laying down the manner in which the market value of any asset may be determined, the rule making authority can lay down the method or mode of determining the market value of each asset and such provision can be considered only procedural and not substantive and, therefore, such provisions apply to the pending cases. The Court observed as follows :
".... in order to determine the net wealth of an assessee, each asset has to be separately valued in accordance with s. 7(1) read with the relevant rule, in this case, r. 1BB. Since s. 7(1) is a machinery section and since the rule to be made under s. 46(2) must relate to the manner in which the market value of any asset may be determined, it can be safely inferred that the rule making authority can lay down the method or mode of determining the market value of each asset. When a rule sets out the method or formula for determining the market value of any particular asset, it can only be considered to be procedural and not substantive."
The Court further observed that :
"We do not think that the mere statement in the notification that the rules incorporated by the amendment shall come into effect from 11th April, 1979, is decisive of the fact that the rules were not intended to be retrospective in nature. They had to be brought on the statute book either at once or with effect from a date decided upon by the rule making authority but if the rule introduced by the amendment is found to be procedural in nature, it must operate retrospectively and the mere fact that it was given effect from 1st April, 1979, will not clinch the issue."
The decision in Kasturbhai's case (supra) has since been affirmed by the Supreme Court in CWT vs. Sharavan Kumar Swarup & Sons (1994) 210 ITR 886 (SC).
4. Following the aforesaid decision we hold that law providing for manner and method of valuing the asset other than cash on the valuation date is a part of procedural law and operate on pending cases. We answer the question referred to us in affirmative i.e. in favour of the assessee and against the Revenue. There shall be no order as to costs.